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Geithner's Thirst for Greater Regulatory Powers and Sir Alan of Selective Amnesia

Politics / Market Regulation Mar 25, 2009 - 09:20 AM GMT

By: Rob_Kirby

Politics

Diamond Rated - Best Financial Markets Analysis ArticleMarch 24, 2009 , I sat, watched and listened as U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Benjamin Bernanke gave sworn televised testimony to a U.S. Senate Banking Committee.

The gist of the testimony and solutions posed by both Geithner and Bernanke were that the Federal Reserve / Treasury combo be mandated more regulatory power to cure the existing financial crisis and prevent future financial disasters from occurring – because their existing mandate was inadequate.


This theater left me shaking my head.

I'd like everyone to think about what these two men said under oath and, then consider how it pans with the following – excerpted from Stanford University alumni magazine :

After Brooksley Born was named to head the Commodity Futures Trading Commission [CFTC] in 1996, she was invited to lunch by Federal Reserve chairman Alan Greenspan.

The influential Greenspan was an ardent proponent of unfettered markets. Born was a powerful Washington lawyer with a track record for activist causes. Over lunch, in his private dining room at the stately headquarters of the Fed in Washington , Greenspan probed their differences.

“Well, Brooksley, I guess you and I will never agree about fraud,” Born, in a recent interview, remembers Greenspan saying.

“What is there not to agree on?” Born says she replied.

“Well, you probably will always believe there should be laws against fraud, and I don't think there is any need for a law against fraud,” she recalls. Greenspan, Born says, believed the market would take care of itself…..

….As chairperson of the CFTC, Born advocated reining in the huge and growing market for financial derivatives….

….. Back in the 1990s, however, Born's proposal stirred an almost visceral response from other regulators in the Clinton administration, as well as members of Congress and lobbyists…….

… Robert Rubin, who was treasury secretary when Born headed the CFTC, has said that he supported closer scrutiny of financial derivatives but did not believe it politically feasible at the time…..

….. Ultimately, Greenspan and the other regulators foiled Born's efforts, and Congress took the extraordinary step of enacting legislation that prohibited her agency from taking any action. Born left government and returned to her private law practice in Washington …..

Contacted for the Stanford Alumni magazine article, Mr. Greenspan reportedly now disagrees with Born's recollection and characterization of their lunch conversation years ago by responding,

“This alleged conversation is wholly at variance with my decades-long held view,” he said in an e-mail, citing an excerpt from his 2007 book The Age of Turbulence, in which he wrote that more government involvement was needed to root out fraud.”

Born stands by her story .

A Fond Remembrance

This kind of got me wondering, if Sir Alan of Selective Amnesia – the knighted one – might remember whether he was mischaracterized in another one of his dalliances, back in 1966, when he wrote a paper titled Gold and Economic Freedom , wherein he wrote,

“The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.”

Now, I ask how the above girds with this revelation ,

Alan Greenspan himself referred to the federal government's power to manipulate the price of gold at hearings before the House Banking Committee and the Senate Agricultural Committee in July, 1998: "Nor can private counterparts restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise ."

Far be it from me to call the esteemed former Federal Reserve Chairman a bold-faced-liar, I'll leave that kind of conjecture to you, the reader. But I digress.

Contemptuous Critiques

Now, I would like to focus on the disdain and utter contempt the establishment showed Ms. Born and her clarion calls – for probity's sake - that EXISTING REGULATIONS be enforced,

The CFTC was created in the '70s to regulate agricultural commodities markets. By the '90s, its main business had become overseeing financial products such as stock index futures and currency options, but some in Washington thought it should stick to pork bellies and soybeans. Born's push for regulation posed a threat to the authority of more established cops on the beat.

“She certainly was not in their league in terms of prominence and stature,” says a lawyer who has known Born for years and requested anonymity to avoid appearing critical of her. “They probably thought, ‘Here is a little person from one of these agencies trying to assertively expand her jurisdiction.'”

Some of the other regulators have said they had problems with Born's personal style and found her hard to work with. “I thought it was counterproductive. If you want to move forward . . . you engage with parties in a constructive way,” Rubin told the Washington Post. “My recollection was . . . this was done in a more strident way.” Levitt says Born was “characterized as being abrasive.”

Her supporters, while acknowledging that Born can be uncompromising when she believes she is right, say those are excuses of people who simply did not want to hear what she had to say.

“She was serious, professional, and she held her ground against those who were not sympathetic to her position,” says Michael Greenberger, a Washington lawyer who was a top aide to Born at the CFTC. “I don't think that the failure to be ‘charming' should be translated into a depiction of stridency.”

Others find a whiff of sexism in the pushback. “The messenger wore a skirt,” says Marna Tucker, a Washington lawyer and a longtime friend of Born. “Could Alan Greenspan take that?”

One Size Fitts All

You see folks; I bring all of this up for good reason. The contemptuous, maligning treatment of Ms. Brooksley Born as head of the CFTC concisely parallels the poisonous treatment doled [or Gored, perhaps?] out to Ms. Catherine Austin Fitts , former Assistant Secretary, FHA – Bush I Admin.

During her time in government, Fitts discovered that Fannie and Freddie were accidents looking for a place to happen. When she left government and formed Hamilton Securities, in her capacity as government contractor, she learned ;

“In 1995, a senior Clinton Administration official shared with me the Administration's targets for Fannie Mae and Freddie Mac mortgage volumes in low- and moderate-income communities. We had recently reviewed the Administration's plans to increase government mortgage guarantees — most of these mortgages would also be pooled and sold as securities to investors. Even in 1995, I could see that these plans would create unserviceable debt loads in communities struggling with the falling incomes expected from globalization. Homeowners would default on mortgages while losses on mortgage-backed securities would drain retirement savings from 401(k)s and pension plans. Taxpayers would ultimately be hit with a large bill . . . but insiders would make a bundle. I looked at the official and said that the Administration was planning on issuing more mortgages than there were houses or residents. “Shut up, this is none of your business,” the official snapped back.”

Ladies and gentlemen, there's a pattern here. Ms. Fitts attempted to identify rampant systemic financial abuse – in her case, colossal mortgage fraud. From speaking with Ms. Fitts personally, I am aware that Fitts – in her capacity as President and founder of Hamilton Securities – actually met with the Greenspan Federal Reserve.

For trying to expose the reality that one of the dirty little secrets behind the housing bubble is the long standing partnership of narcotics trafficking and mortgage fraud and the use of the two in combination to target and destroy minority and poor communities with highly profitable economic warfare back in the 1990s – Fitts found herself the subject of secretive but factually baseless investigations by H.U.D. and the U.S. Dept. of Justice. Along with the legal proceedings aimed against her, her company [Hamilton Securities] was ruined, she was threatened and harassed to the point where recent revelations by Seymour Hersh that, Vice President Dick Cheney was running an executive assassination ring made her stop and consider ,

“I have always wondered if this ring was responsible for a series of poisonings between 2002 and 2005 while I was in litigation with the federal government.”

The Common Thread

It has occurred to me that Ms. Fitts attempts to fix a broken system shares a common thread with Ms. Born's experience – The U.S. FEDERAL RESERVE – that blocked both their efforts to either prevent or expose systemic, fraudulent financial abuse.

And now there is serious consideration to give the Federal Reserve / Treasury more power????

As the most important members of the President's Working Group on Financial Markets [aka the Plunge Protection Team], these two bodies would have had direct input [and thus been complicit] into the S.E.C's 2007 elimination of the “ Uptick rule ” on legal shorting of equities.

Similarly folks, these are the same two organizations which in 1999 oversaw the repeal of the Glass-Steagall Act , which since 1933 had separated investment and commercial banking activities – allowing unfettered growth in securitization and derivatives trading.

Additionally, in the same complicit manner, these folks for years sat idle and silent - observing the inaction of the S.E.C regarding the serial Naked Shorting of equities [the illegal practice of short selling shares that do not exist] in contravention of EXISTING SECURITIES LAW .

Add to this their complicit derelict behavior of crony capitalism in fashioning schemes of “selective” outright bans on shorting, what-so-ever, of selected financial equities. Now, ask yourself, “Should these miscreants at the privately owned Federal Reserve really be graced with more power?”

While we're doing our dirty laundry, let us also not forget last Friday night's [Mar. 20] takeover [or mugging, perhaps?] by the FDIC of U.S. Central Federal Credit Union , a huge wholesale credit union with about $34 billion in assets based in Lenexa , Kansas . This institution provides settlement services to 100 percent of corporate credit unions and 93 percent of all U.S. credit unions. At minimum, this means that local Credit Unions all over the U.S. [one of the only credible alternatives to money center banks] will now be facing higher costs according to Reuters :

“The immediate costs of the takeover are coming out of a $7 billion industry-maintained insurance fund, but will mean higher premiums levied on retail credit unions.”

The reason offered for regulators taking control of this wholesale credit union [and in turn burdening the ENTIRE credit union system] is alleged to have been that it failed a regulatory mandated “financial stress test”. If U.S. Central Federal Credit Union failed their financial stress test; the cadavers of Citibank and B of A must already be undergoing autopsies at the county morgue.

Interesting how anything that competes with, threatens, or offers an alternative to the Federal Reserve controlled financial system [like community banking] dies or is threatened but AIG lives!!!

In short, the Fed / Treasury combo should have their oversight curtailed since they have clearly shown a blatant disregard for enforcing existing financial law.

In my own research and writing, as a foot soldier for the Gold Anti Trust Action Committee [ GATA ] – I have personally chronicled and documented systemic financial abuse – encapsulating ALL that Fitts and Born have warned about - all emanating from the highest levels of the U.S. Fed and Treasury – primarily in the global gold and bond markets; and all aimed at fraudulently perpetuating the global primacy of the U.S. Dollar.

I've been able to determine through independent forensic examination of undeclared, nefarious Fed Reserve activity over the last 5 years that the Federal Reserve has NEVER had a coherent policy – unless one considers the major observable planks of “scorched earth” and/or “gold-price-bashing” to be any semblance of sound economics.

Isn't it time that the Federal Reserve is publicly recognized for what they are – derelicts on the dole – and what they've done? Isn't it about time they are ORDERED to put their shovels down and quit digging a deeper-debt-hole for the American public? Haven't the American people given enough?

America and the world-at-large might be a better place to live if American monetary and political elites would quit trying to become more omnipotent and – for a change - simply execute their existing mandates.

This article is published publicly [unusually] in its entirety. Subscribers to Kirbyanalytics.com regularly receive guidance and actionable recommendations to help insulate themselves from the aforementioned systemic financial abuses. Subscribe here .

* Rob Kirby acknowledges the keen nose of GATA lieutenant Adrian Douglas and Lemetropolecafe.com for drawing attention to the existence of the Brooksley Born interview in the Stanford University alumni magazine

By Rob Kirby
http://www.kirbyanalytics.com/

Rob Kirby is the editor of the Kirby Analytics Bi-weekly Online Newsletter, which provides proprietary Macroeconomic Research. Subscribers to Kirbyanalytics.com are benefiting from paid in-depth research reports, analysis and commentary on rapidly unfolding economic developments as well as recommendations on courses of action to profit from chaos. Subscribe here .

Copyright © 2009 Rob Kirby - All rights reserved.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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